LONDON: Ireland is about to overtake Finland and become the most expensive country in the 12-nation euro zone, a government report warned on Thursday.

The soaring prices of cigarettes, alcohol and housing are fuelling a fast rising cost of living and threatening Ireland’s economic competitiveness, according to the Irish government research agency, Forfas.

A trip to a liquor store would be 60 per cent cheaper in Spain according to the report, while rented accommodation in Portugal is just a fifth of that in Ireland.

Eggs, lettuce, oranges and even potatoes are among the most expensive in the euro zone. However, Ireland is a good place to buy black pepper, tea bags, bread and shoes.

The report, compiled using figures from accountants ‘PricewaterhouseCoopers’, concluded that “Ireland is now estimated to have become the second most expensive country in the euro zone in 2002 for consumer prices, marginally behind Finland. It is likely that Ireland will become the most expensive country in the euro zone during 2003.”

The report blames the rapid expansion of the Irish economy. During the 1990s it earned the country the title of Celtic tiger but, although growth has since eased, inflation has not slowed as rapidly.

Ireland’s inflation rate is now well above that of the euro zone average. Last year consumer prices in the euro zone rose by just over two per cent, in Ireland the increase was five per cent.

But with big economies like Germany teetering on the brink of recession Ireland cannot look to the European central bank to raise interest rates to help dampen Irish inflation.

The central bank of Ireland acknowledged on Thursday that it had carried out work on what Ireland’s interest rates would be if the country had not signed up for the single currency but a spokeswoman for the bank declined to say what conclusion had been reached.—Dawn/The Guardian News Service